How Preneed Insurance Can Help You Prepare for Funeral Costs

When a loved one enters into palliative care, it’s hard to articulate the overwhelm of emotions and concerns. Not only do you face the emotional and mental health toll of the situation, but you also face the eventuality of burial and end of life expenses.

These expenses include all bills that your loved one incurs as it relates to their death, including outstanding debts, out-of-pocket medical expenses, and, most notably, the cost of their funeral. And the costs associated with this are rising.  

The National Funeral Directors Association (NFDA) released its annual report on funeral costs reported in 2021, illustrating how many of the costs involved in a funeral have risen over the past five years. Before diving into the details of funeral costs, financial planning, and how strategies like using preneed insurance can help, let’s cover all you need to consider with funeral planning. 

How Much Does a Funeral Cost?

Much like a wedding, the cost of a funeral can vary widely depending on how simple or elaborate it is. The NFDA reports median cost, or the middle number between the highest and lowest rate reported by its members. 

The median cost of a funeral is $7,848, which shows an increase of nearly seven percent over the last five years. This cost includes various burial options and associated costs. The report provides more details about price changes for different types of funerals.

For example, here is a breakdown of median costs for an adult funeral that includes burial and viewing: 

Source: NFDA

For funerals with viewing and cremation, here’s a look at all the costs associated:

Source: NFDA

Simply put, the cost of your loved one’s funeral will largely depend on how you want to celebrate their life and what kind of funeral they want. 

Decisions You'll Need to Make for a Funeral

When it’s time to plan for a funeral for your loved one (or your own), it’s important to look at all your options. There are several considerations to keep in mind. 

Burial Options

One of the most common funeral choices in the U.S. involves burial. A traditional burial process includes embalming to preserve the body for viewing and interment in either a coffin or a burial vault. While in-ground burials are the most common, you can also consider:

• Above ground burials in a community mausoleum
• Above ground burials in a lawn crypt
• Above ground burials in a private mausoleum
• Natural burials
• Cremations

It’s important to confirm the wishes of your loved one while they’re still living before you proceed with funeral planning. While burials are common, there are plenty of other options that don’t include traditional embalming and viewing. 

Funeral Options

Interest is growing for different funeral options, most notably for green funerals. A green funeral is less expensive and more environmentally friendly than traditional in-ground burials. 

As the NFDA’s 2022 Consumer Awareness and Preferences Report found, 60.5% of respondents would be interested in exploring “green” funeral options because of their potential environmental benefits, cost savings, or for some other reason.

Funeral service providers are expanding their services to help with planning for several alternative funeral options, including:

• Home funerals
• Natural water cremation (aka resomation)
• Ash scattering ceremonies

Ultimately, it’s best to plan for a unique funeral experience that aligns with the wishes of the deceased. This is why it’s important to personalize your own funeral or your loved one’s funeral. 

Personalizing Your Funeral

This process can feel overwhelming. You want to honor your loved one with a beautiful service while also staying within budget and capturing the unique personality of the deceased. And the possibilities seem endless. 

It’s best to first acknowledge the deceased’s personal interests. If you’re planning for a loved one, consider what they’re passionate about and what they enjoyed in their life. With that in mind, you can reach out to other family members and friends to get their input.

For example, you can ask them about their favorite memories with the deceased and share ideas about the service, like who to invite, where to host the celebration of life, and the other common funeral elements, like the decorations, the music, and the eulogy. 

With all this in mind, you can decide on where to hold the service (e.g., church, funeral home) and communicate how you want to personalize specific aspects of the funeral. 

The choices people make for their final arrangements are highly personal and depend not only on cost but also on personal and religious beliefs, family traditions, and ideas about the kind of legacy one wants to leave. An insurance policy can help you make sure that you have the funds you need to host a positive funeral experience, as well as plan for saving funds for your own funeral. 

What is Preneed Insurance?

There are two main types of policies that are intended specifically for funeral expenses: preneed insurance and final expense insurance. With preneed insurance, you typically pay a single premium up front and make arrangements in advance with a funeral home. The policy then pays for the products and services you select.

Final expense insurance is sold by an insurance agent and funded by monthly premiums. This type of policy allows more flexibility than preneed insurance, providing funds to cover any expenses associated with the end of your life. 

Beyond the funeral and burial or cremation, these can include a wake or other party to follow the funeral, travel expenses for loved ones, final out-of-pocket medical expenses, or anything else your loved ones need help with.

How Preneed Insurance Can Help You Prepare for Funeral Costs

A preneed contract is a life insurance policy purchased through a funeral home, which uses the proceeds to fund your funeral. When the insured passes away, the funeral home files a claim with the insurance company. That money is used to cover the costs of the funeral. 

A Statement of Goods and Services allows you to sit down with the funeral director to determine what products and services you would like to include. Then, the funeral home director will create an estimate of how much it will cost to fund the celebration of life.

ELCO Mutual offers both preneed and final expense insurance policies. Individuals up to 95 years of age can purchase a guaranteed-issue preneed policy with a single premium. Multiple-payment plans are also available, depending on the client’s age at the time of purchase and answers to two basic health questions.

Our final expense policies have benefit amounts from $2,500 to $35,000 to fit a broad range of needs. An immediate guaranteed death benefit is available for qualifying applicants, and a modified benefit is available for those with certain health conditions that disqualify them from the standard plan. 

Under the modified plan, the death benefit is equal to 110% of the premiums paid in the first two years and the full purchased benefit amount in the third policy year. Both policies offer the potential to earn dividends that increase the final benefit amount.

We’ve provided life insurance and annuities since 1946, helping policy holders save big while staying proactive in planning for funerals and other end-of-life expenses. Learn more about how preneed insurance can help you prepare for funeral costs by contacting our ELCO Mutual agents.